Problem 1(4 points) The management of Campanile Company believes that the following capital structure is optimal: $ value 715,000 Components Bond, coupon 8% (now selling at $1075, has 14 years to the maturity and the face value of $1,000) Preferred stock (dividend per share = $5.00) Common stock Retained Earnings Total = 249,000 371,000 326,000 1,661,000 Dividends on common stock are currently $3 per share, and they are expected to grow at a constant rate of 6 percent. The Campanile common stock is currently selling at $40, and the preferred stock is selling at $50. The Flotation cost on new issues of common stock is 10 percent, and the interest on bonds is paid semi-annually. The return on the market portfolio is 12.1 percent, the risk-free rate is 3 percent, and the company's beta coefficient is 1.22. The company's tax rate is 40 percent. Calculate the following: a. the after-tax cost of bonds, b. the cost of preferred stock; c. the cost of retained earnings: d. the cost of new common stock, e. What is your best estimate of the company's WACC? Show your work. f. Please evaluate the capital structure of this company